Measuring Underemployment

by Rachel Vilsack

In December, Minnesota’s unemployment rate fell to 5.5 percent, its lowest rate since August 2008, and considerably lower than the national average of 7.8 percent. The unemployment rate measures people who are not working, but who are available and actively seeking work. Some workers—like those who are discouraged or those with some other barrier to looking for work—are not included in the official calculation. We can see how they impact the national rate, as there are six different measures of the unemployment rate produced by the Bureau of Labor Statistics (BLS) each month. But is there a measure for people who are underemployed?

Counting people who are underemployed – or people who are employed but not utilizing their full education or skill set – is not as easy to measure. The BLS notes that “…no official government statistics are available on the total number of persons who might be viewed as underemployed. Even if many or most could be identified, it would still be difficult to quantify the loss to the economy of such underemployment.”

Part of the reason for the difficulty in measuring underemployment is that people could be underemployed for many reasons. A job seeker unable to find appropriate work in his or her career field may find a job that requires less education or skill then he or she possesses. Alternatively, it could be a matter of choice; maybe the person doesn’t want to work in the career in which they’ve been trained. Surveys, like those that capture the unemployment rate, aren’t easily able to quantify decisions about careers that people make.

Regardless of choice, analyzing people’s educational attainment might give us some insight into underemployment. Using data from 2010, about 44 percent of Minnesotan’s are properly educated for the job they have, seven percent are under-educated, and 49 percent are over-educated and, therefore, possibly underemployed. The BLS found a similar trend for recent college graduates. A recent report found that about 48 percent of employed college graduates worked in jobs that required less than a college diploma.

We know that some groups in Minnesota continue to face extreme labor market challenges, including the long term unemployed, youth, racial minorities and many with post-secondary education. Regaining a “full” utilization of our labor resources will take longer than returning to pre-recessionary levels of employment and unemployment.